What did they say, not what did they mean: the objective theory of assent

The Saturday night before Christmas, nineteen fifty two, in a small town in Virginia. A man named Lucy walks into a restaurant that a man named Zehmer runs, along with a filling station and a motor court. It is around eight o'clock. They have known each other for years. They have a drink. They have another. And Lucy says what he has said before. Sell me the Ferguson farm.
Zehmer says he will, for fifty thousand dollars. They argue about whether Lucy can raise the money. The talk goes on for thirty or forty minutes. Then Zehmer takes a restaurant check, turns it over, and writes on the back of it. The first draft says I agree to sell. Lucy objects, because the farm belongs to Zehmer and his wife, and he wants her name on it too. Zehmer writes it again. We hereby agree to sell to W O Lucy the Ferguson Farm complete for fifty thousand dollars, title satisfactory to buyer. Zehmer signs it. His wife, Ida, signs it. Lucy puts a five dollar bill on the counter as a payment. Zehmer does not pick it up.
The next day, Lucy arranges with his brother to take a half interest and pay half the price, and he hires a lawyer to check the title. And Zehmer says the whole thing was a joke. He says he was, in his own words, high as a Georgia pine, and that the evening was, again in his words, just a bunch of two doggoned drunks bluffing to see who could talk the biggest and say the most.
So here is the question. One of them says he was joking. The paper says otherwise. Is there a contract? Think about it before I go on, because this case is where the law tells you what it thinks a promise is made of.
Before we get to the court, let me ask the question I will keep asking. What exactly did these people promise each other? Not what they felt. Not what they would say the next morning. What did they say and do, at that counter, on that night?
Here is the first line for the board. A contract requires mutual assent, an agreement. And here is the second line, which is the whole of today. Assent is judged objectively. The law does not look into a person's mind to ask what he privately meant. It looks at what he said and did, and it asks what a reasonable person, in the position of the other party, would have understood from that. That is called the objective theory of contracts.
Third line. It follows that a person's undisclosed intention does not matter. If your words and your acts have one reasonable meaning, you are bound by that meaning, whatever you were thinking. There is one exception, and it matters. If the other party knew that you did not mean what you said, then there is no agreement, because the other party did not reasonably understand your words as a real promise. The test is not what you meant. It is what the other person reasonably understood.
Why does the law do it this way? Because the alternative is unworkable. If a contract depended on what each party secretly intended, then any promise could be escaped by saying afterward, I never meant it. Nobody could rely on anything. Commerce runs on people being able to take each other's words at face value. So the law holds people to the reasonable meaning of their words, and it puts the burden on the person who did not mean it to make that clear at the time.
Now the case. Lucy against Zehmer, decided by the Supreme Court of Appeals of Virginia in nineteen fifty four. The trial court had refused to enforce the sale and dismissed Lucy's bill. The question on appeal was whether the writing on the back of that restaurant check was a binding contract, or whether Zehmer's claim that he was joking took it out of the law of contracts altogether.
The court looked at what had actually happened. Here is one of its sentences. The appearance of the contract, the fact that it was under discussion for forty minutes or more before it was signed, Lucy's objection to the first draft because it was written in the singular, and he wanted Mrs Zehmer to sign it also. The court went on through the rest of the evidence in the same way. The rewriting. The signatures. The five dollars. The talk of title. None of it looked like a joke.
And then the court stated the rule. Listen to the words. We must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. And this. The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. And one more, quoting an older authority. The law, therefore, judges of an agreement between two persons exclusively from those expressions of their intentions which are communicated between them.
On the exception, the court said this. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party. And it drew the conclusion. So a person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement.
The court reversed the decree and sent the case back with an order that the Zehmers perform the contract. Lucy got the farm. Zehmer may well have been joking, in his own head. The law did not care what was in his head. It cared what he wrote, what he signed, and what a reasonable man sitting across that counter would have made of it.
One more case, briefly, because it shows the same rule in an office instead of a bar. In nineteen oh three, a salesman named Embry, whose written contract had expired, pressed his employer for a new one and said he would quit unless he had it. The employer said, go ahead, you are all right, get your men out and do not let that worry you. Embry went back to work. Two months later he was let go, and the employer said he had never meant to rehire him. The Missouri court held that it did not matter what the employer meant. In the court's words, if what McKittrick said would have been taken by a reasonable man to be an employment, and Embry so understood it, it constituted a valid contract. Same rule. Different room.
Now let's change one fact. Same restaurant, same paper, same signatures. But Zehmer is visibly staggering and slurring, and Lucy can see it. Is there a contract? Choose an answer before I go on.
Most people say no, and the reason is a good one. He was drunk. But be careful about why that matters here. The objective theory asks what a reasonable person in Lucy's position would understand. A reasonable person watching a man who can barely stand write out a farm sale on a bar check has reason to doubt that a serious bargain is being made. The argument for assent gets much weaker, not because of what was in Zehmer's head, but because of what Lucy could see. And notice a second question hiding behind the first. Whether a person too drunk to understand what he is doing can be bound at all is a separate doctrine, incapacity, and we will meet it in module eleven. Keep the two questions apart.
Change one fact again. Same paper, same signatures. But as Zehmer signs, Lucy laughs and says, you are kidding. Then the next morning Lucy sues. Is there a contract? Choose.
Most people say yes, because the writing is the same writing. But look at what has changed. The objective test cuts both ways. Lucy's own words at the counter are evidence of what he understood, and what he understood was a joke. The exception in the rule is built for exactly this. An unreasonable meaning, known to the other party. If Lucy knew Zehmer was not serious, Lucy cannot later hold him to it. The writing does not save him, because a contract is not a piece of paper. It is an agreement, judged by what both sides reasonably understood.
Change one fact a third time. Zehmer writes, I might sell the Ferguson farm to Lucy for fifty thousand dollars, and signs it. Lucy signs it too. Is there a contract? Choose.
Most people hesitate here, and they are right to. This time the problem is not secret intent. It is the words themselves. Might is not a commitment. It is a statement of possibility, and a reasonable person reading it would understand that Zehmer had not yet agreed to anything. There is no assent to a sale, because nothing in the words expresses a present willingness to sell. That question, what words amount to an offer, is the whole of the next module.
Here is what people get wrong about this doctrine, and why it is tempting. The first mistake is believing that secret intent governs, that the real question is what Zehmer meant. It feels fair. It is not the law, and the reason is that no one could ever rely on a promise if it were. The second mistake is the opposite one. Reading Lucy to mean that anything signed is binding, no matter the circumstances. The court did not say that. It said the circumstances here, forty minutes of talk, a redraft, two signatures, looked like a serious bargain to a reasonable person. Change the circumstances and the answer can change. The third mistake is forgetting where the reasonable person stands. The test is not what a reasonable person in general would think. It is what a reasonable person in the position of the other party, knowing what that party knew, would have understood.
Here is the rule, in one breath. Assent is judged by what the parties said and did, as a reasonable person in the other party's position would understand it, not by what either of them secretly intended, unless the other party knew the words were not meant. Now, five questions.